AT&T Mobility customers seems to be holding their breathes for a possible new device launch later this year, as the carrier reported a slowdown in device upgrades during the recent second quarter that helped boost wireless margins.
The nation’s No. 2 carrier reported its best ever wireless margins, with operating income margins increasing from 26.9% in 2011 to 30.3% this year and earnings before interest, taxes, depreciation and amortization margins surging from 41.1% in 2011 to 45% this year.
The carrier said it added a total of 1.266 million new connections during the quarter, which was a 15.6% increase compared with 2011. That growth was propelled by “non-traditional” channels that included 472,000 net adds through wholesale partners (90.3% increase year-over-year), 382,000 connected devices (.8% year-over-year increase), 320,000 direct postpaid net additions (3.3% drop from 2011) and 92,000 direct prepaid net additions (32.8% decrease compared with 2011).
Verizon Wireless kicked off second quarter results reporting last week, noting it added just short of 1.2 million connections during the quarter, which was down from the more than 1.3 million connections it added during the second quarter of 2011. Verizon Wireless’ results included much stronger direct postpaid growth (888,000 net additions) compared with AT&T Mobility, while direct prepaid net additions (290,000 subscribers) fell just short. Verizon Wireless did not break out wholesale of “connected device” results for the quarter.
AT&T Mobility’s overall churn also improved year-over-year from 1.43% during the second quarter of 2011 to 1.18% this year. That result was just above the 1.11% posted by its larger rival.
AT&T Mobility’s overall wireless revenues increased 4.8% year-over-year to nearly $16.4 billion during the second quarter, while expenses remained flat at $11.4 billion. The result was a solid increase in segment income from just under $4.2 billion in 2011 to just over $4.9 billion this year.
Bolstering the revenue increase was a continued surge in wireless data usage, which helped boost revenues 18.8% year-over-year to $6.4 billion. The carrier noted that postpaid average revenue per user increased 1.7% year-over-year to $64.93, with data services growing 14.1% to $28.04. Verizon Wireless reported $24.53 in postpaid data ARPU during the quarter.
While AT&T Mobility noted that device upgrades across its customer base slowed during the quarter, it still managed to sell 5.1 million smartphones and pushed its postpaid smartphone base to 77%. Smartphone customers, while typically requiring a larger up-front device subsidy, are on the hook for data charges over the two-year life of the contract. AT&T Mobility noted that its smartphone customers spend twice as much per month as non-smartphone customers.
As for the all-important iPhone, AT&T Mobility said it activated 3.7 million new Apple devices on its network during the quarter, with 22% of those activations new customers to the carrier. By comparison, Verizon Wireless said it activated 2.7 million iPhones during the quarter, with approximately 25% of those sold to new customers.
Analysts have noted that they expect smartphone sales to remain flat through the current third quarter as customers await an expected launch of Apple’s latest iPhone variant that most anticipate will happen later this year.
AT&T Mobility added that about two-thirds of its smartphone customers were on a tiered data plan, which the carrier launched two-years ago to replace its previously offered unlimited offering. Customers that were signed up for the unlimited offering have been able to maintain that plan, though customers are now subject to slower data speeds once they surpass 3 gigabytes of data usage per month.
Stay tuned for more details on AT&T Mobility’s second quarter results.
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